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FxWirePro: UK PMIs signal mixed bag sentiments, 2m skews still indicate bearish risks, and OTM puts trading at reasonable premium

The IHS Markit/CIPS UK Services PMI fell to 53.8 in November 2017 from a six-month high of 55.6 in the previous month and below market expectations of 55. Business activity and volumes of new work grew at a softer pace while the rate of job creation was unchanged from October’s seven-month low. 

Whereas manufacturing and construction PMIs have managed to produce upbeat numbers, Manufacturing PMI rose to 58.2 in November of 2017 from an upwardly revised 56.6 in October, beating market expectations of 56.5, while constructions prints at 53.1 against consensus at 51.2 and previous 50.8.

Key findings:

Business activity growth slows from October’s six-month high

Sharp and accelerated rise in prices charged by service providers

Job creation remains subdued in November

These are the leading fundamental indicators to signify the economic health and signal how quickly businesses respond to market circumstances, and purchasing managers clutch perhaps the most current and relevant insight into the company's view of the economy.

Please be noted that the above nutshell indicates the hedging sentiments still prevail for bearish risks and hence, bid for OTM put strikes upto 146 levels.

To substantiate this stance, 2.5% OTM puts of these tenors are trading at 7.5% more premium than the current IVs of 2m expiries which seems to be justifiable contemplating the major trend of this pair and above stated driving forces.

Currency Strength Index: FxWirePro's hourly GBP spot index is flashing -137 (which is highly bearish), while hourly JPY spot index was at 85 (which is bullish) while articulating (at 06:25 GMT). For more details on the index, please refer below weblink:

http://www.fxwirepro.com/currencyindex.

FxWirePro launches Absolute Return Managed Program. For more details, visit: 

http://www.fxwirepro.com/invest

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